Concrete Cloud Computing

Benefits administration is a headache for HR people, balancing the needs of the employee for great coverage with the needs of the organization to maintain a reasonable cost profile. To make things simpler, organizations often integrate the benefits provider’s online capabilities with their HRMS, eliminating some of the pain associated with keeping employee records accurate.

Annrai O’Toole October 02, 2008
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In the last entry I wrote a fairly abstract piece trying to define “Cloud computing.” This time, I’ll give a concrete example of what we’re thinking about.

Benefits administration is a headache for HR people, balancing the needs of the employee for great coverage with the needs of the organization to maintain a reasonable cost profile. To make things simpler, organizations often integrate the benefits provider’s online capabilities with their HRMS, eliminating some of the pain associated with keeping employee records accurate.

The tradeoff in the on-premise world is an IT cost — owning and managing the integration. Not only is there IT cost involved initially, any addition or change to that benefits provider requires a new integration. The result: massive upfront planning, an expensive integration and a lot of IT inertia when it comes to making business changes later.

What we can do is take that integration burden and move it up into the cloud. Workday Benefits Network is a good example. It provides a set of pre-built, hosted integrations to well known Healthcare and Financial Benefit providers.Benoit Lheureux of Gartner would call these “Packed Integrating Processes (PIPs) — a form of prebuilt integration.”

This means a couple of very valuable things for the customer.

  1. Workday takes care of electronically updating the Benefit Provider whenever an employee makes a change to their Benefit Plan or chooses another Benefit Provider.
  2. We can offload the integration itself by managing and maintaining it at our datacenter. In fact, it is simple enough that the customer can select from pre-integrated benefits providers in an online list. Point and click integration.

But how is this different from what can be achieved with an On-premise solution?

  1. A customer (or some consulting group) can certainly build a set of integrations to specific benefit providers. But in the on-premise world, that means it is your problem. Upgrades are an IT project and when something breaks, its yours to fix.
  2. It would nice to easily shop around for new Benefit Providers. Well, in the Cloud Computing world where those integration are delivered as a service, this is an easy thing to do — the IT cost of change is eliminated. In the On-premise world where you need to get someone to built those for you, it is a difficult and expensive task.
  3. We publish well defined public APIs to this Benefits Network, so that in theory, any Benefit Provider can plug into this network. This means that new and smaller Benefit Providers, can potentially gain access to new customers. It also means that if there is a particular Benefit Provider that we in Workday don’t support then they can plug in themselves. This is clearly something that is just plain impossible with an on-premise solution.
  4. Finally, it is not hard to imagine as both Workday and the Benefits network evolve, that in the not too distant future there will millions of employees under Workday management and hundreds of Benefits Providers plugged in. Instead of our customers having to build and rebuild the same integrations over and over, we can focus on new innovations. Imagine:
    • Analytics within the company looking at benefits usage patterns to help review what offerings are most used and most important for employees.
    • Analytics (with appropriate opt-ins) for benefits trends within industries

In the Cloud computing world, a whole new set of possibilities emerge.

Cloud Computing isn’t just about changing the technology so that costs and risks of ownership get transferred from the buyer to the provider. In the above example, points 1 and 2 speak clearly to how those costs and risks move from the customer to the vendor but are diminished through aggregation. Cost savings are good, especially in the current economic climate, but they are not transformative. What is transformative about Cloud computing is that it introduces new business model opportunities. Points 3 and 4 above outline how, with the right technology, a whole new business model around Benefit provision can emerge.

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